Operational incomes are stubborn things

Please click on the spreadsheet to enlarge or print

Recently, the Marlins made a claim as to what they spend [$10 million] on marketing and suggested that that has implications as to their perceived profitability, i.e. “hidden costs.”

Based on the Forbes analysis, marketing expenses, and all expenses other than ‘Player [major & minor leagues salaries & benefits] Expenses,’ are captured on our P&L in the the ‘National and Other Expenses’. If you think about it in terms of your own businesses, these are their operating expenses. These expenses are common to all MLB teams [minor league operations, player development, rent etc] and are the expenses which are least subject to fluctuation, as opposed to ‘Player Expenses’ which could vary significantly from one year to another – for example the Marlins in 2005 had $91 million in ‘Player Expenses’ and only $31 million one year later in 2006.

The spreadsheet above shows the ‘operating expenses’ attributable to the Marlins – $48 million in 2007 – are consistent with the other lowest revenue teams and could accommodate the $10 million in marketing and the over $20 million in farm system costs which the Marlins President David Samson stated [about halfway through] on his radio show. That December 2007 radio show, made after the Cabrera & Willis trade, gives us a good example of the smokescreen people in Mr Samson’s position are forced to attempt in denying profitability – let’s examine his various points:

  1. Farm system costs Marlins over $20 million, which does not include bonuses, and the Marlins do not own any of their minor league affiliates.
  2. People believe Forbes claims re the Marlins operational profitability [$43 million in 2006] because they assume that player expenses are the Marlins only expense.
  3. They have depreciation and interest expenses which are not being considered in the $43 million amount.

Here is my response to each point:

#1 – Farm system or player development costs:
Outside of salaries and bonuses, it’s difficult to see where significant costs for minor league operations would arise given how the Player Development Contract [PDC] – the document which governs the relationship between the big league and independent minor league teams – divides costs responsibilities. Again, aside from salaries, the costs entail the players medical treatment, uniforms and part of the transportation costs. Some minor league teams are owned by the major league team, who are then responsible for all the costs and receive the revenues. All 6 of the Marlins minor league affiliates are independently owned. See the minimum salaries according to the new CBA agreement.

To be fair, Mr Samson might have meant to say player development costs, which would include minor league player salaries, in the over $20 million figure. Noted sports economist, Andrew Zimbalist, has written recently that “the average MLB team spends over $20 million in player development costs, which includes $11.5 in minor league player salaries.” Important to note that the $48 million we have been referencing, does not include minor league salaries, which are captured under ‘Other Players & Benefits’ expenses in the Player expenses section of our P&L.

Bottom line, there is plenty of room in the $48 million of non-player expenses to accommodate all the expenditures the Marlins have stated or hinted at to date. Like facts, operational incomes are stubborn things.


#2 – Forbes assumes that player expenses are the Marlins only expense.
Bizarrely untrue. As noted, Forbes allows for $48 million in non-player expenses – National and Other Expenses in 2007.

#3 – Forbes does not consider the Marlins depreciation and interest expenses in determining their operational profitability.
Debt and interest costs are supposed to be excluded from operational income. That’s why it’s operational income as opposed to net income. Operational income is considered a better indicator as to how your core business is performing rather than including certain expenses, such as depreciation, which could create ‘paper’ losses and distort actual performance. This is not a complicated point, certainly one not lost on a former Wall Street professional like Mr. Samson. In fact, he made the very point to ESPN back in 2004.

The reason for the flip-flop? I hope you answered incentives. Mr. Samson acknowledged the distinction between operational and paper losses because at the time – the Marlins had an operational loss [$12 million] in 2003 – that served the Marlins purposes in explaining the need to cut costs. Interesting to note, Forbes loss estimate for 2003 was $12 million and the Marlins self-professed loss in the article was $20 million.

Interests costs – Forbes does estimate each teams interests costs for their valuation analysis, but I do not use that part of their work.

Here is the most constructive way to think about it; How reasonable is it to believe that the Marlins, especially prior to the stadium deal being secured, would have spent a significantly higher percentage of their revenues on how they operate their franchise than the other 4 teams in MLB which had revenues under $150 million? I would say that would be very unlikely and uncharacteristic of how Mr Loria would operate a franchise which could have been looking to relocate. There is a track record for Mr Loria’s behavior in similar circumstances and it did not involve increased marketing expenditures in an effort to lure fans. Forbes again! Hey maybe they just have it in for the guy? OK, try this.

The only “hidden costs” are those hidden from us fans and with good reason. The more that is revealed, the less the wiggle room. This is a good example of why MLB teams avoid discussing the specifics of their finances.

 

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P8 – So what’s my point?

Drawing is of the newly proposed Florida Marlins Ballpark

As the Florida Marlins enter into a partnership with local government – given the public monies, albeit mostly tourist tax dollars, used to finance the Marlins new home in my Little Havana neighborhood – I expect that there will be greater scrutiny on how they run their franchise, specifically with respect to player salaries and their profitability. As someone with a financial background, I watch in slight amazement as the Marlins management suggests, typically without specifics [understandably we now realize], that they are not profitable. Further, they seem rather dismissive in suggesting that their finances involve concepts beyond the grasp of their fans.

Normally, when someone points out that their finances are private and they won’t provide you access to them, that would cut-off most conversations fairly quickly. But in the case of MLB, their player contracts, attendance and network television deals are public knowledge. In other words, their main revenues and expenses are in the public domain, just not specifically allocated. Forbes, one of the most prestigious business publications in the US, has provided a yearly franchise valuation of every MLB team since 1998. In the course of that valuation, Forbes’ analysis estimates such key financial information as total revenues, player expenses and operating income or loss.

I intend to provide a website which will help Marlin fans follow the finances of their team – stadium issue included. My goal is that whenever the topic of the Florida Marlins finances arises, us fans have a readily accessible source of information to combat those who [understandably] seek to confuse us.

I would prefer not to see Mr Loria, or any other owner, profit from projects which involve public monies. But that is not how this issue has played out all over the US. The Marlins scheduled level of contributions for the stadium are consistent with other recent deals between MLB and local governments. As such, I don’t feel strongly enough about wanting to avoid the rich guy getting richer scenario [envy], to wish to see the franchise leave. So I support having the stadium built for the Marlins.

Bottom line, people who own desirable products [MLB franchise] typically profit in one way or another, that’s the goal. But for now, I just can’t sit back and allow them to pretend otherwise, without giving a blog.

 

P7 – Blog links by subject

I have trouble trusting anyone who says “trust me,” so here is all the info which leads me to my conclusions. I will be updating this list periodically. Please pass along any suggestions or links you think would be useful.

I am considering developing the ‘Marlins Denials’ into a sitcom.

Anti-trust exemption – Washington Post series part 1 – June 2004
Anti-trust exemption – Washington Post series part 2 – June 2004
Anti-trust exemption – Washington Post series part 3 – June 2004
Blog mention – Sabernomics – April 2008
Blog mention – The Hardball Times – April 2008
Broadcasts – National contracts – Mediaweek – July 2006
Cable – Ratings – Palm Beach Post – March 2008
Cable – Regional Sports Networks [RSN] strategies – Mediaweek – March 2008
Cable – RSN strategies – The Hardball Times – March 2007
Cable – Revenues driven by media market – San Antonio Express – April 2006
CBA – Collective Bargaining Agreement – MLB – October 2006
CBA – Biz of Baseball – Maury Brown interviews Andrew Zimbalist – November 2006
CBA – Sports Biz News – October 2006
CBA – Yahoo Sports – Jeff Passan – October 2006
Expenses – MLB Player Salaries – USA Today – Annual
Expenses – Minor league costs – Detroit News – Lynn Henning – April 2008
Expenses – Player Development Expenses – Sports Business Journal – Andrew Zimbalist – March 2008
Expenses – Minor league player costs – MiLB
Forbes Accuracy – Forbes Business of Baseball Reporting – Annual
Forbes Accuracy – The Hardball Times – John Beamer – May 2007
Forbes Accuracy – Columbia Journalism Review – Edward Colby – April 2006
Forbes Accuracy – ESPN – AP – April 2002
Forbes Accuracy – Baseball Prospectus – Doug Pappas – April 2002
Marlin Denials – Forbes is a so-called reputable magazine and absolutely inaccurate, no specifics – Sun-Sentinel – Juan C. Rodriguez – April 2008
Marlin Denials – $10 million in marketing and other hidden costs – Sun-Sentinel – Dave Hyde – April 2008
Marlin Denials – Marlins are revenue-neutral [no profit] – Sun-Sentinel – Mike Berardino – April 2007
Marlin Denials – Low-revenues & highest marketing costs in MLB – Miami Herald – Clark Spencer – March 2008
Marlin Denials – Farm system costs over $20 million – David Samson 790 Radio Show [halfway through program] – December 2007
Marlin Denials – Acknowledging that the Marlins are the “biggest revenue [sharing] taker” in MLB – The Biz of Baseball – Maury Brown – February 2006
Marlin Denials – Acknowledging the big difference between paper losses [depreciation] and operating results – ESPN – Darren Rovell – April 2004
Marlin Management – Sabernomics – J.C. Bradbury – March 2008
Marlin Management – The Hardball Times – John Brattain – March 2008
Marlin Management – The Biz of Baseball – Maury Brown – March 2008
Marlin Management – Sports Business Journal – Eric Fisher – January 2006
Marlin Management – Washington Post – Steve Fainaru – June 2004
Marlin Management – Forbes – Nathan Vardi – April 2004
Marlin Management – South Florida CEO – Jeff Zbar – April 2003
MLB Economics – $6 Billion in Revenue – Milwaukee Journal – October 2007
MLB Economics – Economists discussion – The Biz of Baseball – May 2007
MLBAM – Advanced Media growth – USA Today – December 2007
Revenues – Attendance – ESPN – Annual
Revenues – Central Fund & Rev Sharing – NYT – Michael Lewis – Nov 2007
Revenues – 2007 Revenue Sharing – MLB.com – Mike Bauman – Sept 2007
Revenues – Central Fund & Rev Sharing – Sports Biz News – October 2006
Revenues – Central Fund & Rev Sharing – Pittsburgh Tribune – June 2006
Revenues – Central Fund & Rev Sharing – NYT – Murray Chass – April 2006
Revenues – Central Fund & Rev Sharing – WSJ – Stefan Fatsis – April 2006
Revenues – Line by line revenue forecasts – USA Today – December 2001
Stadium – Braman suit – Sun-Sentinel – Sarah Talalay – May 2008
Stadium – Approved – Sun-Sentinel – Sarah Talalay – February 2008
Stadium – Approved – USA Today – AP – February 2008
State of Wisconsin – Limited-scope Review – May 2004

 

P6 – OK, what do the locals say?

It’s a rite of spring: Forbes comes out with its team value estimates and tells the world the Marlins are raking in a huge profit … and the Marlins insist those numbers are pure fantasy.

Here’s what team president David Samson told our Juan Rodriguez: “Every year I continue to be surprised at the absolute inaccuracy that a so-called reputable magazine is willing to print. We’ve never gotten called by them (at Forbes). We’ve never been asked to verify, deny, confirm, nothing. It’s just a shame their readership is forced to read numbers that aren’t true. I know the number they have for the Marlins is simply wrong. They have no information of any kind on which to base that article.”

 

Maybe not, but it’s not like Forbes is Deadspin or The Onion or Jo-Jo’s Baseball Blog. A magazine that covers financial news better than almost anyone else can’t possibly be off by $36 million on this one, can it?

Mike Berardino – Sun-Sentinel


April 2, 2008

“Marlins owner Jeffrey Loria has a big, wonderful, unique opportunity this season to build a ton of goodwill with South Florida. He can substantially grow his club’s oft-disappointed fan base.

He can make amends for the embarrassingly low player payrolls. He can help alleviate grumbling over the Orange Bowl site chosen to build the at-long-last-approved stadium. He can even ease the sting if this season proves to be the long, losing campaign most seamheads believe it will be.

He can do all of that by committing publicly to keeping his best players and making sure they are a part of the future beyond the new park’s 2011 opening.”
Greg Cote – Miami Herald

April 1, 2008
“This leads to the predictable wailing about the team’s payroll — the lowest in the sport. But it is hard to fault ownership. What’s the point of doubling the payroll if the team isn’t close? The Royals are wasting $55 million on Gil Meche with no chance of competing. If you were running a business and could lose for $40 million or lose for $21 million, wouldn’t you choose the latter? This is a better alternative than the path of Mr. Marlin’s [Jeff Conine] Orioles, who keep spending dumb money and haven’t had a single winning season in more than a decade.”
Dan Le Batard – Miami Herald

Good point about not spending just to spend, but why deal with a hypothetical when Hanley Ramirez is right in front of us? As Lloyd Benstsen [were he alive] might say, Hanley Ramirez is no Gil Meche. But it’s the same argument made in greater detail on JC Bradbury’s Sabernomics blog.
Jorge Costales

April 1, 2008
“That’s probably why New Haven is home to the Jeffrey Loria Center for the History of Art. It only took a $20 million donation – made to finance construction which will be completed by July 2008], which could have bought another two years of Dontrelle Willis in a Marlins uniform, but everything can’t be about baseball, can it?”
Mike Berardino – Sun-Sentinel

I include the quote about the donation for two reasons:

  1. There seems to a question about Mr Loria’s personal finances and whether he has sufficient capital to operate a MLB team – why else would have MLB provided Loria a $38 million interest-free loan [conditional on resolving the stadium issue] at the time of the franchise purchase? A casual googling only turned up one article which estimated his wealth at $400 million 3 years ago.
  2. A general interest question. If someone gives away $20 million, what would be a reasonable estimate of their private wealth? Let’s use the tithing criteria, I think we can agree that it would be unusual to find someone who gave away more that 10% of their wealth, especially if it does not relate to a tragic incident or an end of career legacy-insurance move.

Thoughts?
Jorge Costales

March 31, 2008
“The Marlins got $600 million in public money for a new stadium and amenities. They can’t just brush the subject of their embarrassing payroll under the carpet anymore and hope no one notices. As much as they want to, they can’t just keep saying, “This is all we can afford until we get our new stadium.”

These owners get $30 million in revenue sharing from other teams, which neither H. Wayne Huizenga or John Henry got in their tenures. They also get $30 million in local and national TV money. All that before selling a ticket.”
David Hyde – Sun-Sentinel

P5 – Could Florida do Wisconsin?

Could the Florida Marlins finances be reviewed as the Milwaukee Brewers were?

I don’t know, but I doubt it. Any MLB team would fight it at all costs. The Brewers’ situation was a rare exception, given the fact that their owner also happened to be the MLB Commissioner. Who knows, it may not even be the Marlins call within its contractual obligations to MLB. But it’s worth asking our elected representatives to push for something similar, if only to watch them squirm.

The basis for the State of Wisconsin “limited-scope review” was concern over the Brewers reduction in player salaries at a time when they were using public monies to construct Miller Park, which opened in 2001. Any similarities to the Marlins situation is strictly intentional. The limited-scope description means that it was not a full-blown audit, and as such could not have been expected to be as thorough and complete as an audit. Bottom line, the State of Wisconsin probably did not get to see anything the Brewers truly wanted to keep from them.

A limited-scope review is much different than an audit, yet the public probably did not focus on the fact that the work performed by Wisconsin’s Legislative Audit Bureau was not an audit. Case in point, the linked article by a State of Wisconsin web site, alternately refers to the work as an “audit” or an “examination.”

In terms of public relations, the Brewers and Commissioner Selig benefited from the confusion. They had an incentive to appear open and avoid totally opening their books. The Legislature had an incentive to be appearing to do something. Everyone’s incentives were met.

P4 – How reliable is Forbes?

Since it is not in MLB’s interests to divulge or get into any specifics regarding their finances, they have generally have just said that Forbes was wrong and noted that they did not have access to MLB’s financial statements. However in 2002, when Commissioner Selig again noted that the Forbes amounts were fiction, MLB met with Forbes [see ESPN article] and here were the specific disputes between them for the 2001 season:

  • Forbes reported that MLB had $3.57 billion in Revenues
  • MLB acknowleged $3.55 billion in Revenues
  • Forbes reported that MLB had $3.49 billion in Expenses
  • MLB acknowleged $3.78 billion in Expenses

The significant difference in expenses was attributable to items Forbes was aware of, but disputed MLB’s assertion as to the losses associated with them, i.e. minor league operations.

Among various bloggers dedicated to following baseball, there is little faith in MLB’s claims, as noted by the analysis provided by Doug Pappas in Baseball Prospectus back in 2002. In March of 2008, Maury Brown of The Biz of Baseball, characterized the Marlins approach as “living on corporate welfare.”

Even in cases where people take exception with Forbes amounts, as with John Beamer at the Hardball Times during 2007, the concerns are about their methodology regarding the team valuations [a subject we have avoided here], as opposed to doubting MLB’s profitability.

If anything, Mr Beamer’s concern regarding revenues and expenses are that Forbes might have overstated expenses in years prior to 2005. Regarding the Marlins 2006 financial performance, he notes, “they slashed payroll and stashed the loot.”

Think of it in terms of your own jobs. If your credibility were on the line, how likely do you think it would be for you to improve over a 10 year period? A better argument criticizing their accuracy could have been made in the early years. When you factor in that they were almost exact in terms of revenues back in 2001 and that their sources and methodology should have improved over time – Forbes performs the same franchise valuation analysis for every major sport – all those factors argue in favor of Forbes accuracy.

In addition, the Columbia Journalism Review looked at the dispute between Forbes and MLB and gave Forbes the benefit of the doubt, while acknowledging that without proof that Forbes actual saw MLB Team’s financials, there could not be certainty about their figures.

P3 – C’mon dude, not even Loria?

Well in his case, let’s just say you should not worry about how his investment is doing. John Brattain from The Hardball Times documents it nicely.

Look, the effort to shed light on the Marlins finances is not meant to be an attack on the organization. As I’ve tried to make clear, they have acted in a manner consistent with their interests and other MLB teams in similar circumstances. It’s just that on this issue – the veil of secrecy re MLB finances – our interests [mine as a fan] do not coincide. To be fair, Mr Loria has his fans, even science writer Natalie Angier champions his cause.

Actually, a good case can and was made by a prominent sports economist, J.C. Bradbury, that the Marlins are one of the most effective organizations in MLB. He ranked them #1 for the years analyzed in his book, 2003 through 2005. In addition he recently posted a lengthy argument on his baseball blog titled, Defending the Marlins, which I believe makes excellent points, including a very interesting statistical analysis about the effects of free agent signings on attendance, but most relevant to this blog was the following:

“While some of this might be luck, I think good management explains most of the difference. Some of that money not going to player payroll is going to baseball operations devoted to scouting young talent that is cheap. And because this practice yields substantial savings over signing expensive free agents, then this is a good use of funds. At least the Marlins deserve credit for putting a better field on the team than most teams with similar budgets.

If the Marlins can build a good core with cheap players, why doesn’t its front office fill out its roster with quality free agents in order to make a stronger bid for the post-season? Another point that I want to make is that Marlins fans don’t seem to be as sensitive to winning as other major-league franchises. Thus, buying free agents doesn’t yield the return at the turnstiles like it does for other teams.”

I would just note that until it can be better explained how the Marlins impressive scouting performance would equate to having spent a significantly greater amount of money in that area – i.e. How did they differ appreciably in their operations from what other MLB teams do? – then I think it makes sense to assume that their results have more to do with the quality of the work of Larry Beinfest, Michael Hill and their scouts as opposed to having invested more money into their infrastructure than other MLB teams. I start out with the assumption that most teams do roughly the same things in scouting and development, but that some are just better at it.

In practical terms, do they have operations in 10 countries as opposed to only 5 for most other teams? Are their scouting operations consistently staffed at significantly higher levels and with better paid scouts? Do the number of baseball academies they run exceed what the other 4 lowest revenue teams do?

That aside, I think Mr Bradbury makes a good case for teams relying more on prospects than free agents. But if those teams are receiving Revenue Sharing [RS] monies, it also means they probably violate the CBA’s provisions regarding what they are supposed to do with those monies. Why shouldn’t the fans participate in the RS windfall with a drop in ticket prices? If MLB prefers not to enforce a salary floor on the RS receiver teams, why not force teams like the Marlins to slash ticket prices? It would reduce their RS driven operational profits, create goodwill and an incentive for the team to spend money in the future.

My point is not exactly how the Marlins should spend their monies. But that given their current levels of payroll and national revenues, there can be no ‘rational’ doubt as to the Marlins’ profitability at the levels which Forbes estimates and that they are violating MLB’s provision regarding what they should be doing with the revenue sharing monies received.

So the answer to the question – Could we have afforded Miguel Cabrera [at Detriot Tiger rates]? – might be yes, but no thanks, we’ve got a better plan. But among reasonable people, the answer can’t be no, because we don’t have the revenues.

P2 – Who are the bad guys?

Wrong question.

OK, if the Marlins profitability is so obvious, how do they get away with suggesting that they are not profitable [or revenue-neutral, David Samson’s favorite obfuscation] and that their finances are too complicated for writers and fans to grasp?

Forbes aside, it is not in the best interests of those in position to call them out on it – MLB & the Revenue Sharing payer teams – to do so. Here’s my perspective on each of the groups involved:

Florida Marlins / Revenue Sharing receiving teams – By keeping their finances hidden, they avoid the pressure to spend MLB’s Revenue Sharing monies on player salaries. Every MLB team attempts to hide their finances, teams receiving Revenue Sharing monies have the most incentive to do so.

MLB / Commissioner Selig – While guarantying that revenue sharing monies would continue to increase in the new Collective Bargaining Agreement [CBA] in effect for the years 2007 through 2011, MLB avoided placing specific demands on what the teams receiving the Revenue Sharing monies would have to spend on player salaries. The likely reason would be to avoid the organizational nightmare of micro-managing the 7 or 8 small market teams which are typically receiving the Revenue Sharing monies. Having Revenue Sharing receiver teams not spend their Revenue Sharing monies is a headache for MLB and a threat to the Revenue Sharing structure which has developed under Selig [see Pittsburgh Tribune-Review article]. They would prefer that the smaller market teams use the money to be more competitive, but their main incentive is achieving labor peace [CBA] and staying out of the way thereafter.

The CBA contains language which indicates that teams receiving Revenue Sharing monies must use them to “improve on-the field performance.” No team has ever been disciplined or had a grievance filed against them for violating that policy. Which is one reason the Marlins just can’t come out and say that they intend to pocket Revenue Sharing monies to help fund their portion of the planned stadium construction costs. Assuming that were true.

Revenue Sharing payer teams – i.e. Yankees, Mets, etc. – While they too benefit from MLB’s veil of secrecy regarding their finances – both NY teams are currently having stadiums built which will benefit from public monies [see NYT article] – it must still grate them to watch teams like the Marlins & Rays pocket their money. But apparently not enough of a problem for them to mess with their golden goose or they would have insisted on provisions which left no doubt as to how teams receiving monies would have to spend those monies. I would assume that Revenue Sharing payer teams are an excellent source of information for Forbes researchers.

But if you doubt the resentment, just read what the Yankee’s Hank Steinbrenner said recently. “I don’t want these teams in general to forget who subsidizes a lot of them, and it’s the Yankees, the Red Sox, Dodgers, Mets,” he said to The New York Post. “I would prefer if teams want to target the Yankees that they at least start giving some of that revenue sharing and luxury tax money back.”

Local Media – Because the Marlins finances are not public information, there is a limit as to how strongly they can attack the Marlins claims, without having to back down because of a lack of hard evidence. In addition, it is not the type of material which the typical sports reader or listener could be expected to be interested in. Aside from making a name for themselves, there are practically no incentives for people in the media to pursue this issue. In fact, the incentives would if anything, argue for a harmonious relationship, given their inter-dependence from an advertising and programming perspective.

Players Union – These guys are killing my incentive narrative. If the Yankees are ‘taxed’ $76 million, which could have been spent on a multi-year deal for some aging pitcher who would have broken down in 18 months, and the Marlins & Rays proceed to not use those monies for player salaries – that would appear to be an invitation for the Players Union to get involved [insert steroids conspiracy theory here].

Local Government – Those who oppose public monies to build stadiums for sports franchises are the other group whose interests would coincide with getting into the Marlins finances. However, their arguments are often too populist [rich owner rant, etc] to have a meaningful effect.

Marlin Fans – We have no leverage. Hey it’s not like threatening to stay away is still an option.

To put the conflict among the various parties in economic terms; While at a macro-level it may be desirable for each entity to pursue their own interests [see Adam Smith], at the micro-level it frequently gets messy and complicated [see Virgil Sollozzo].

P1 – Rationale behind the numbers

Hey don’t those highlighted amounts on your Florida Marlins P&L Financial Statement mean you are guessing?

Yes.

But do me a favor, please print it out and follow me here – it won’t hurt.

Each of the amounts highlighted ties into the Forbes Total Revenue amount. So, the guess is about the breakdown of the highlighted amounts only. For example, if one of the estimates were changed to be $3 million higher, another one of the estimates would have to be lowered by $3 million. Within the highlighted amounts, it’s a zero-sum game.

Think of this as a puzzle for which Forbes has already provided every key piece [Gate Receipts, Total Revenues, Total Player Expenses and Operating Income or Loss]. To the extent to which additional information can be uncovered, there is less which has to be approximated to fill in the individual revenue items.

For example, there was a State of Wisconsin Legislative Audit Bureau review report released in 2004 [see page 7 of report], which provided the MLB Central Fund revenues for 1998 through 2003. In addition, Rob Manfred, chief labor executive for MLB, disclosed that the Marlins had received $41 million in Revenue Sharing monies across the two years ending in 2003.

For our purposes, the year 2005 was a very good year. Apparently due to the CBA negotiations ongoing in 2006, MLB Central and Revenue Sharing amounts for 2005 were disclosed in various reports – see list of articles below. So the only guesses involved the Marlins Local Revenues. Using the USA Today 2001 forecasts for each revenue line item, allowed me to approximate the Local Revenues which tied into the Forbes Total Revenue amount. While their attendance has obviously been low, the Marlins have had good ratings for their local broadcasts and likely benefited from an aggressive Fox Sports regional sports network [RSN] efforts to acquire MLB broadcast rights and dissuade teams from setting up their own team-owned RSN.

Note re Revenue Sharing – In the world of MLB finances, Revenue Sharing [based on Local Media revenues] and Luxury [based on payroll] taxes are all part of the revenues which are taken from from certain teams. However, only Revenue Sharing is redistributed to the other [low revenue] MLB teams. Luxury taxes are collected and kept at the MLB Commissioner’s office level.

Those differ from MLB Central revenues [National broadcast & cable contracts, MLB Advanced Media, merchandise, etc] which are derived from external sources and distributed equally among all the teams.

In the case of MLB Central revenues, there is a strong basis to assume that each team’s share has been growing consistently. Revenue Sharing amounts are the revenue item subject to the most fluctuation. Therefore, other than in 2005, I treated it as the last component and plugged the amount needed to match Forbes Total Revenues.

  • MLB Central Fund & Revenue Sharing info – NYT – Murray Chass
  • MLB Central Fund & Revenue Sharing info – WSJ – Stefan Fatsis
  • MLB Central Fund & Revenue Sharing info – NYT – Michael Lewis
  • MLB Yearly Attendance info – ESPN
  • MLB Yearly Major League Player Salaries info – USA Today
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